FHA to join Fannie and Freddie in conservatorship

According to Bill McBride, the Federal Housing Authority is fundamentally insolvent, and will require a $16B bailout. This is based on a HUD report which has been taken down, perhaps due to early release, and reported in the Wall Street Journal.

This isn’t entirely unexpected. I mentioned the FHA as a possible casualty in January 2010. But this is going to substantially complicate the problem of reaching a fiscal deal, since it will have to be factored in in the middle of the craziness in Washington.

However, this is only notional insolvency, based on model projections and not a sum that has to be paid out, cash-on-the-barrel. Apparently the fact that house prices have stopped falling while foreclosures continue and interest rates continue to fall reduced the projected revenue stream enough to turn what looked like a surplus into a deficit. Expect Darrell Issa and John McCain to demand a Watergate-style commission. Back in Realityville, expect the taxpayers to have to pony up a couple of billion a year for the FHA to continue operations.
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In the course of looking up the history, I am reminded of Bill McBride’s co-blogger Tanta (Doris Dungey), who died very young almost four years ago. Wherever you are, Tanta,

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This entry was posted on November 15, 2012 at 10:48 pm and is filed under mortgage crisis.
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